Infineon Launches Billion-Euro Smart Power Fab Project to Reduce Europe’s Reliance on Global Supply Chains, Supported by Government Funding

Infineon launches billion-euro project in Dresden to reduce Europe’s reliance on vulnerable global supply chains

Infineon has begun expanding its semiconductor plant in Dresden as part of its Smart Power Fab project. The high-tech plant, which will become operational in 2026, will be ​​equivalent to more than four football pitches in size and will receive an investment of €5bn ($6bn) to expand the company’s semiconductor production and create about 1,000 jobs. According to the company, the plant will contribute to Europe’s decarbonisation and digitisation by producing components used in energy-saving power supplies, small motor controllers, data centres, and Internet of Things applications.

The project, which is currently one of the most prominent in the European Union, is seen as an important step in reducing Europe’s dependence on semiconductors from the Asia-Pacific region and the United States. The infrastructure project, backed by government funding, is consistent with the European Chips Act, which aims to double the global share of chip production in Europe to 20% by 2030, reducing the impact of supply chain volatility, such as the current global semiconductor shortage.

However, Infineon’s request for a grant of €1bn ($1.2bn) from the EU has generated criticism, with some groups such as Leibniz Institute for Economic Research Halle (IWH) arguing that public funds should be better used. In contrast, US chip manufacturer Intel is building a plant in Magdeburg and has requested state subsidies, with reports suggesting it is pushing for far more than the promised €6.8bn ($8.1bn) grant.

Despite criticism from some quarters, the German government has high expectations for Infineon’s new plant. The ceremonial launch event was attended by European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz. Along with the start of the construction project, this week has also seen the release of Infineon’s second-quarter results. Despite a drop in revenue in the first quarter, the German chipmaker had a successful 2021, achieving revenues of €14.2bn ($16.9bn).